MUMBAI | NEW DELHI: The union cabinet on Thursday deferred a decision on modifications to the insurance amendment bill as did not see great hurry in moving changes to the law if it could not increase the foreign direct investment in the sector to 49% from 26%.
The cabinet approved the micro finance bill that will make the Reserve Bank of India sector regulator with powers to set interest rates and fee.
“The consideration of the item has been postponed because 26% foreign investment is already permitted,” Finance Minister Pranab Mukherjee told reporters after the meeting of the Union Cabinet on Thursday.
He said the bill will be taken up later suggesting that the government may try to build a consensus to increase the FDI limit in the sector to 49%.
The microfinance bill requires that all micro-finance institutions (MFIs) with minimum net worth of over Rs 5 lakh have to be registered with the RBI. The sector is currently regulated by the respective states.
The bill also proposes to set up a micro finance development council to ensure prudent development of the sector.
MFIs have been finding it difficult to function after the Andhra Pradesh government passed a law imposing stringent regulations on the sector.
The insurance bill delay is a setback to the Manmohan Singh government that is keen to get key financial bills passed to assuage concerns that reforms are dead.
The government had introduced the Insurance Laws (amendment) bill, 2008 in the Rajya Sabha in December 2008 to update the sector law and increase the foreign participation in the sector by lifting the FDI limit.
The finance ministry had argued that an increase in the FDI limit will help step up investment. The former finance minister and BJP leader Yashwant Sinha headed standing committee on finance had in its recommendation on the bill said there was no need to increase the FDI limit in the sector.
CABINET APPROVES MICROFINANCE REGULATION BILL
NEW DELHI: Union cabinet has approved a bill aimed to bring microlenders under the central bank’s oversight, a minister, who declined to be named as the parliament is in session, said on Thursday. The Microfinance Institutions (Development and Regulation) Bill needs parliament’s approval to become a law. Microlenders have been accused of aggressive lending and recovery practices and high interest rates, which attracted calls for regulation. India’s once-thriving microfinance sector was devastated by a crackdown more than a year ago by the government of the southern state of Andhra Pradesh, which was the industry hub and largest market. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/cabinet-approves-microfinance-regulation-bill/articleshow/13083706.cms)
RBI TELLS EXPORTERS TO SELL DOLLARS TO GIVE RUPEE A LEG UP
MUMBAI: The Reserve Bank of Indiaordered exporters to convert half of their foreign exchange earnings kept in bank accounts into Indian rupee to prop up the worst-performing BRICS currency, a day after it closed at a record low, prompting fears of a further slide. But the relief lasted only a few hours before the rupee resumed its decline since the order could bring in just about $3 billion, enough to cover five days of deficit. The RBI also cut banks’ intra-day positions in currency trade to five times of the net overnight open positions, which is set by the central bank as part of curbs announced on December 15. The overnight positions are not disclosed by the central bank. More measures, including funding crude imports from foreign exchange reserves, a new US dollar mobilisation scheme, or even a sovereign dollar bond sale to boost the currency, could be on the cards, traders speculated. (For details log on to : http://economictimes.indiatimes.com/news/economy/indicators/rbi-tells-exporters-to-sell-dollars-to-give-rupee-a-leg-up/articleshow/13086865.cms)
HOUSEHOLDS EXPECT MARGINAL FALL IN INFLATION: RBI SURVEY
MUMBAI: Indian households expect that inflation will be somewhat reined in, points out a Reserve Bank of Indiasurvey on inflation expectations. The findings of the 27th round of the central bank’s inflation expectations survey of households conducted in March 2012, show that inflation expectations for the coming three-month period marginally declined to 11.7% from 12.4% in the previous round. The inflation expectation for the year ahead period has marginally declined to 12.5% from 13.3% in the previous round. However, the expectations that prices will slow down lasts for a shorter time frame as they expect inflation to rise further by 70 and 150 basis points during next three-month and the next one-year period, respectively. (For details log on to : http://economictimes.indiatimes.com/news/economy/indicators/households-expect-marginal-fall-in-inflation-rbi-survey/articleshow/13087134.cms)
NRI DEPOSIT FLOWS TRIPLE IN FY12 TO $11 BILLION
MUMBAI: Taking the benefit of higher interest rates and a weakening rupee, non-resident Indians (NRIs) sent $11 billion (nearly Rs 60,000 crore) home into bank deposits during 2011-12, three times more than in the previous year. In 2010-11, about $3.23 billion came as NRI deposits. The highest accretion was in the non–resident (external) rupee account, at $7.46 billion, against an outflow of $280 million in 2010-11, according to Reserve Bank of India (RBI) data. Bank executives said a large amount moved into NRE deposits after banks raised rates in the second half of FY12. RBI had raised the ceiling on these deposits as a step to attract foreign fund flows when the rupee was rapidly losing value against other currencies. The interest rates in Indiaare high compared with those being offered in developed countries and in those of the Persian Gulf. (For details log on to : http://www.business-standard.com/india/news/nri-deposit-flows-triple-in-fy12-to-11-bn/474023/)
GOVT BANKS TO INSTALL 60,000 MORE ATMs
MUMBAI: After a gap of six to eight months, public sector banks (PSBs) have geared up to establish 60,000 more Automated Teller Machines (ATMs) across the country over the next two years. The state-owned lenders had put their ATM expansion on hold as a centralised outsourcing model was being worked out by a committee appointed by the government. ATM machine manufacturers and payment service providers will be participating in the bidding process, being led by six major PSBs — State Bank of India, Punjab National Bank, Union Bank of India, Bank of India, Bank of Baroda and Canara Bank. “This will be a completely outsourced model. The requirements for 22 regions across Indiahave been clubbed into 16 bidding circles,” said a senior official from a payment service provider company. (For details log on to : http://www.business-standard.com/india/news/govt-banks-to-install-60000-more-atms/474068/)
CANARA BANK NET DROPS 7.7% ON DEPOSIT COST
BANGALORE: Canara Bank on Thursday reported a 7.7 per cent drop in net profit — at Rs 829 crore — for the fourth quarter ended March 31, 20112, compared with Rs 899 crore in January-March of last financial year. Total income grew 23 per cent to Rs 9,037 crore during the quarter as against the year-ago period. The operating profit for the fourth quarter was also down 12 per cent to Rs 1,491 crore as against Rs 1,694 crore reported in the corresponding quarter last financial year. “Our net profit has declined mainly due to higher cost of deposits, which moved up to 7.35 per cent in the fourth quarter of 2011-12 as compared to 5.80 per cent in the corresponding quarter last year,” said S Raman, chairman and managing director of Canara Bank. The rise in cost of deposits was more than the rise in yield on advances. The yield on advances moved up to 10.93 per cent as against 9.73 per cent in the fourth quarter last year. (For details log on to : http://www.business-standard.com/india/news/canara-bank-net-drops-77deposit-cost/474024/)
PUNJAB NATIONAL BANK: MARGINS MAY DIP FURTHER
MUMBAI: Given that the banking sector is a proxy for India’s economic growth, the fourth quarter performance of India’s second-largest PSU lender, Punjab National Bank, becomes important. The performance has been marred by across-the-board deterioration in asset quality. Fresh slippages grew 4.3 per cent to Rs 2,800 crore. Analysts say this is a substantial increase from the two per cent growth witnessed in the first nine months of FY12. The bank’s net restructured book stands at 8.5 per cent of loans. Its gross non-performing loans (NPL), combined with the restructured assets, now stand at 11.4 per cent of total loans, claim analysts. This deterioration in asset quality has affected operational performance too, even though loan growth for the year has been 22 per cent. Sequentially, the bank has grown its loan book by 12 per cent, which is much ahead of the system. However, HSBC Global Research says: “The 12 per cent quarter-on-quarter growth in loans was meaningless as margins crashed 38 basis points QoQ, due to interest reversal from NPL recognition, rising funding cost and a surprising decline in yields on loans.” Also, most of the quarter’s loan growth was driven by the overseas book and other riskier segments like agriculture and small and medium enterprises. (For details log on to : http://www.business-standard.com/india/news/punjab-national-bank-margins-may-dip-further/474004/)
ALLAHABAD BANK PLANS TO REVIVE $500-MILLION BOND SALE
KOLKATA: Allahabad Bank plans to revive its $500-million overseas bond sale plan that was put on hold, as its Hong Kong business is soaring due to a rise in trade with China. Bank chairman JP Dua said the bond plan will be discussed in the next board meeting as the lender needs resources for its swelling Hong Kongbusiness, which grew 62% last fiscal to cross the $1 billion mark. It has earned 2.5 times more profit of Rs 48 crore in 2011-12 from the city-state situated on China’s south coast. The 147-year old Indian lender has just one overseas branch and is seeking four more licences from Reserve Bank of Indiafor setting up branches in Dhaka, Shanghai, Singaporeand a second one in Hong Kong. “We need long-term resources for the growing overseas business and to bridge asset liability mismatches,” Dua told ET. (For details log on to: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/allahabad-bank-plans-to-revive-500-million-bond-sale/articleshow/13087080.cms)
IRDA SLAPS PENALTY ON SHRIRAM LIFE
HYDERABAD: The Insurance Regulatory and Development Authority has imposed Rs 28 lakh penalty on Shriram Life Insurance Company Ltd. The fine was imposed for violation of norms pertaining to payments made to referral partners, wrongful application of regulator’s circulars and violations of unit-linked insurance plan guidelines, among others. The company was also warned by the regulator to strictly adhere to underwriting norms, according to an order issued by the IRDA. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3407331.ece)
HSBC MAY EXIT MAIDEN INSURANCE JOINT VENTURE IN INDIA
MUMBAI: Banking giant HSBC may exit its Indian insurance venture, becoming the second foreign company and the third from the financial services industry to give a thumbs down to the local market. “HSBC is evaluating possible ways to exit the business,” said a person close to the business. A decision is expected soon, he added. HSBC, which does not run any insurance company anywhere in the world, has a three-way joint venture in India- called Canara HSBC Oriental Bank of Commerce Life Insurance Company. Canara Bank and Oriental Bank of Commerce together own 74% in the JV with HSBC holding 26%. Indian insurance laws do not allow foreign companies to own more than 26% in local ventures. New York Life recently exited its life insurance JV with Max India, while mutual fund giant Fidelity sold its business to L&T. ING Life is also said to be weighing an exit. (For details log on to : http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/hsbc-may-exit-maiden-insurance-joint-venture-in-india/articleshow/13087316.cms)
AVIVA LIFE’S FY’12 NET UP OVER TWO-FOLD AT RS 74 CRORE
MUMBAI: Aviva Life Insurance today reported over two-fold growth in net profit at Rs 74 crore for the year ended March, 2012. The private sector insurer had posted a net profit of Rs 29 crore in 2010-11. Ranked amongst the top 10 private players, Aviva India’s market share increased to 3.2 per cent in 2011-12 from 2.3 per cent in the previous fiscal, as per IRDA’s report of March, 2012, the private insurer said in a release. The total premium collected by the company recorded an increase of 3 per cent at Rs 2,416 crore over the last fiscal. The new business premium collected by the company grew by 15 per cent to Rs 762 crore despite the poor market conditions and significant challenges faced by the sector, which has resulted in a de-growth of private players by 18 per cent in the same period. (For details log on to : http://economictimes.indiatimes.com/news/news-by-company/earnings/earnings-news/aviva-lifes-fy12-net-up-over-two-fold-at-rs-74-crore/articleshow/13081586.cms)
SKS MICROFINANCE SHIFTS BASE TO SHED ANDHRA TAG
HYDERABAD: SKS Microfinance no longer wants to be known as an Andhra-based company. It has decided to shift its headquarters to Mumbai. It was from Andhra Pradesh (AP) that the microfinance institution (MFI) had grown to become the country’s largest microlender. The state had until recently been the hub of MFI activities but that has changed after various regulatory curbs on their operations. “For credit givers,” chief financial officer S Dilli Raj told Business Standard, “an AP-MFI means it has non-performing assets. Everybody seems to be seeing a difference between an AP-based MFI and a non-AP-based MFI”. The shift to Mumbai for the only listed MFI in the country is expected to take six months to a year. “Moving to the financial capital will help us in resource mobilisation,” Raj said. That apart, SKS’ loan portfolio on Thursday is outside the state. “We also don’t want to increase our net exposure in AP. So, there is no point (in being here),” he added. (For details log on to : http://www.business-standard.com/india/news/sks-shifts-base-to-shed-andhra-tag/474070/)
CAPITAL INTERNATIONAL CLOSES PE FUND FOR $3 BILLION
MUMBAI: Even as fund-raising becomes tough for most emerging markets fund managers, Capital International Private Equity Funds (CIPEF), the global emerging markets private equity programme managed by Capital International, has closed Capital International Private Equity Fund VI (CIPEF VI) for $3 billion, the largest global emerging market PE fund closed in the past five years. The fund exceeded its $2.5-billion original target. CIPEF VI targets 15-20 investments and will prioritise on roughly 16 of the 138 emerging market countries in the world. CIPEF has already committed nearly 20% of capital from CIPEF VI into several investments including Africa-based EatonTowers, a telecom tower development and management company and construction and engineering major Larsen & Toubro’s affiliate L&T Financial Holdings. (For details log on to : http://www.financialexpress.com/news/capital-intl-closes-pe-fund-for-3-bn/947962/)
BANDHAN FINANCIAL SERVICES AIMS TO GROW 30% THIS FISCAL
KOLKATA: Microfinance company Bandhan Financial Services has set a 30% growth target for 2012-13 while it grew by 50% last fiscal. Chandra Shekhar Ghosh, the chairman and managing director of the country’s largest MFI by outstanding loans said the new operational guidelines would bring down the possibility of exponential growth and encourage the micro lenders to consolidate their businesses. “We are told to provide two-year loans instead of one year and therefore the scope to step up the loan every year does not exist any more,”” Ghosh told ET. “”It is not easy to acquire new customers,”” he said. Reserve Bank of Indiahas also said total indebtedness of the micro borrower should not exceed Rs 50,000. It said that MFIs have to lend without a collateral and with a cap of Rs 35,000 in the first cycle and Rs 50,000 in subsequent cycles. The banking regulator has started regulating NBFC-MFIs since last year to guide the troubled sector out of the danger of a virtual collapse. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/bandhan-financial-services-aims-to-grow-30-this-fiscal/articleshow/13078824.cms)
RETAIL INVESTORS GO FOR DEBT OVER EQUITY FUNDS
MUMBAI: The financial year ending March 2012 saw a visible trend of investors’ affinity for debt funds at a time when the equity markets remained weak and volatile. Higher interest rates leading to risk-free guaranteed returns of as high as nine to 10 per cent attracted retail investors to other investment options offered by the fund industry. In 2011-12, pure retail folios in the debt category increased by half a million to 4.5 million as on March, compared with 3.9 million during the corresponding month last year. Even gilt funds, which primarily invest in government securities, saw a rise in the number of investors from 23,310 to 26,222 during the period. Last year, Subir Gokarn, the Reserve Bank’s deputy governor, had stressed there was a need for mutual funds, especially gilt funds, to promote retail holding in government securities. (For details log on to : http://www.business-standard.com/india/news/retail-investors-go-for-debt-over-equity-funds/474009/)
FII HOLDING IN NIFTY FIRMS RISES ABOVE 15 PER CENT IN JANUARY-MARCH QUARTER
MUMBAI: Following a strong foreign institutional investor (FII) inflows of $9 billion in the January-March quarter, the total holding of FIIs in the Nifty companies has increased to more than 15% for the first time in the last six quarters. According to the data compiled by FE, FII ownership in the 50 constituent companies of the NSE’s benchmark index, for the quarter ending March 2012, increased by 75 basis points to 15.5%. Earlier, in the quarter ending December 2010, the FIIs owned 15.3% of these companies. Their ownership declined substantially in the subsequent March 2011 quarter, as the FIIs turned net sellers for the first time in two years. In the latest quarter, FIIs increased their stake in 40 of the 50 Nifty companies by an average 1.2%. The highest quarterly increase was seen in HDFC and Tata Motors, where FIIs increased their ownership by 6.8% and 3.5%, respectively. (For details log on to : http://www.financialexpress.com/news/fii-holding-in-nifty-firms-rises-above-15-in-janmar-quarter/948024/)
MF INVESTMENT IN VST INDUSTRIES INCREASES SUBSTANTIALLY
VST Industries (erstwhile Vazir Sultan Tobacco Company) has witnessed substantial buying interest by mutual fund managers over the past couple of years. This Hyderabadbased Tobacco Company, which has a stronghold in South India, markets its products under the Charminar brand. Investments by mutual funds in the company rose from 2.5% in Jun ’10 to 10.4% by the end of Mar ’12. The company’s stock price, during the same period, has jumped from Rs 539 at the end of Jun 1 ’10 to Rs 1,861 on May 9.’2012. The spectacular performance of the company’s stock on the bourses appears justified its financial performance, especially during the past couple of years. Notwithstanding competition from the country’s largest tobacco company – ITC, which has a strong distribution network across India, VST has managed a sales growth of over 20% consistently over the past two years. The company’s operating profit growth in FY ’11 was also impressive at more than 50% while its margins have been improving consistently since 2009. (For details log on to : http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/mf-investment-in-vst-industries-increases-substantially/articleshow/13086146.cms)
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